The affadavit problems that banks, state regulators, and even the OCC are uncovering could change how the US housing market corrects itself.

If so, then what?

Servicers are going to take it on the chin. That is as it should be. Their incompetence is what led to this mess. Although they may experience some loss to their public image, the real cost is going to be felt in the hundreds of thousands of mortgage payments that they have to make to investors. Servicers have to make payments to investors even if they can’t collect payments from borrowers.  Foreclosure eliminates that obligation. That had been one of the hurdles to loan modifications – investors were (more…)

The problem with Section 8 is not that so many families are able to use their vouchers to rent nice homes.

The Wall Street Journal published a story today that points out the sudden shift in bargaining power among voucher holders. In overbuilt housing markets, landlords are increasingly eager to rent to tenants that are guaranteed to pay rent. That preference would seem to be crystal clear: Who can blame landlords for wanting to get paid on-time, every month?

It would be one thing if this was merely a story about a program that is working to shore up demand for housing at a time when rental vacancy rates are high. Unfortunately, that (more…)

The recession, coupled with its supporting burst of the housing bubble, is prompting a re-evaluation of the role for rental housing. Knowing that it is time to rethink assumptions about home-ownership and rental housing is easy. It gets harder when people ask what should be done. That is because there is no clear agreement on rental demand.

Let’s start with a fact: rents increased this quarter, for the first time since 2008. That should tell us that things are getting better.  However, it gets more complicated when people try to read into the messages underneath the numbers.

Why Rental Housing Is About to Boom

Some would conclude that the foreclosure crisis will put more families into the market for rentals. Call it the Transformation Hypothesis. Homeowners are being transformed into renters. Fannie Mae is foreclosing on tens of thousands of mortgages every day. Certainly, says the reasoning of some, this would mean more renters.That view is (more…)

I am seeing more evidence that a wave of multifamily apartment buildings are about to enter foreclosure, and the prospect of that development seem very concerning.

While the peak for resets on sub-prime loans issued in the last decade has already crested, lots of commercial real estate debt is only now coming to maturation. The Washington Post reports that $1.4 trillion in commercial estate debt should roll over in the next three years. Half of those loans will be underwater by 2011, which should thwart demand for new financing.

While this is troublesome for investors and lenders working in the multifamily housing industry, it is also something that poses significant challenges for neighbors.  One issue is the loss of many affordable rental units. Another (more…)

The benefit of the liquidity nurtured by TARP is going to help people refinance their mortgages, and not to getting borrowers into new homes.

Data from the Federal Housing Finance Administration shows that only 1 in 8 loans made in the first quarter of 2010 went for a home purchase. More than 87 percent of loans made in the quarter were for refinances. With the exception of the first quarter of 2009, when less than 8 percent of loans went for home purchase, this is an inequality unseen in the last thirty years.

Home Purchase Loan Share in the Mortgage Market (Source: FHFA)

There is more than one type of refinance borrower. Some may include borrowers that are trying to get out of a loan with a resetting interest rate. Others may be trying to pull cash out of their home in order to finance a new purchase. Another group is probably made up of people who are current on fixed rate mortgages with affordable interest rates, but that want to take advantage of the historically low interest rates available to borrowers right now.

Fine. However, other data suggests that the people getting refinance loans are not drawn equally from all across our communities. More often than not, the chance of getting approved for a refinance loan is distinctly easier in some neighborhoods, than in others.

In a study (Paying More for the American Dream, IV) that analyzed mortgage data across seven different cities from 2006 to 2008, borrowers in minority neighborhoods were much more likely to be denied a new prime rate refinance. That inequality widened over time, too. During that period, approval rates dropped twice as fast in minority neighborhoods as they did elsewhere.

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